The St. Johns County Utility is in the process of buying Intercoastal Utilities in Ponte Vedra. (Commissioner) Jim Bryant and I voted against this purchase. There are a few important items that the St. Johns County Utility customers really need to know before this deal is finalized.

Financing:

a) The purchase price is so high they cannot finance it on a level plan (i.e. same payment each year) and still keep the rates down.

b) So they plan a wrap or balloon payment of $15 million in the last three years. This is almost three-fourths of the original principal cost.

c) Balloons are used when you pay more than you can afford to get your payments down. But when the balloon comes due, you pay it all.

d) When balloon comes due, you pay or refinance. This is costly. Another half million or more plus another 20 years of payments.

Rates:

a) Mr. Young has promised the Intercoastal customers much lower rates than those currently paid by St. Johns County Utility customers.

b) To do this, he proposes to have Intercoastal be a stand-alone utility with a separate rate structure. A separate, stand-alone utility will not give you economy of scale.

c) Even with a balloon payment of $15 million they cannot get lower rates, so the SJC director reduced the administrative cost of Intercoastal to $64,000. He said he will administer Intercoastal from SJC Utility. The real administrative cost based on ERC's is $527,292. Therefore, you the SJC Utility customer, will be subsidizing the much lower rates of the Intercoastal customers. This is ethnically, morally and probably legally questionable, needless to say political dynamite when the St. Johns County customers find out.

Merger:

The SJC Utility director talks about economy of scale. Hartman Associates, his consultants, talk about merger. You cannot have economy of scale without merger of the two utilities in the future. Mrs. Lavon Wisher, the county's financial adviser (who makes $40,000 off this sale), said you do this later to put off sticker shock (i.e. huge rate increases for Intercoastal, Ponte Vedra customers) but SJC Utility customers get caught with a $15 million balloon and rates? Who knows?

Costs:

a) They are offering to pay $3 million in future hookups. This money is usually used for capital improvements (we hope they won't need improvements).

So price looks like this:

$20,000,000 for plant

$1,500,000 immediate repairs

$350,000 clean up lakes

$3,000,000 future hookups

Total: $24,850,000 for a plant worth $18,500,000 at best.

b) Plus $450,000 in acquisition costs (these are the consultants).

c) Further, Intercoastal uses an outside management group; therefore the county will not be receiving any vehicles, equipment, tools, inventory or materials from ICU. Who pays for these? It is not in the financial package.

d) Finally, ICU is 30 plus years old and will require continued replacement and rehabilitation of the system. With the capitol improvement money from future hookups promised to ICU for seven years, where will the money come from? Also, ICU will be built out in less than seven years. Then what?

Past history:

Past history of SJC Utility is not a financially prudent picture.

They brought the Shores Utility and ended up closing the plant. They extended service to the World Golf Village with few customers. These actions are part of the reason why your rates are the highest in northeast Florida.

In summary:

This prospective acquisition and the time and money that have gone into it are neither prudent nor wise. It is in essence an attempt to grow the County Utility on the backs of the customers. SJC Utility rates are highest in northeast Florida; this projected purchase will keep the rates high and raise the rates of the Intercoastal customers as well.

The consultants are making big bucks off this deal, not us.

Our goal as government officials should be to provide water to all citizens at the lowest rates possible.

This acquisition will not do that and may well do the reverse.

Commissioner Bryant and I have done all we can.

It's up to you to contact the commissioners that voted for it, John Reardon, Marc Jacalone and Nicholas Meiszer, and voice your opinion.